OPEC’s Oil Price Nightmare Is Coming True
Last week’s avalanche of releases from the U.S. Department of Energy showed daily oil production above 10 million barrels a day for the first time since 1970.
A massive week-on-week jump of 332,000 barrels a day must be treated with caution, though. U.S. drillers didn’t have a sudden rush of enthusiasm as WTI prices broke through a psychological $65 ceiling. Rather, the weekly data, which aren’t revised retrospectively, are catching up with monthly estimates that give a more accurate picture of output.
For much of last summer, the weekly data were heavily criticized for over-estimating U.S. output growth. Now, the reverse is true.
Assessments of the output in October and November based on the weekly data were about 370,000 barrels a day lower than the monthly figures, which are published with a two-month lag. There was probably a discrepancy too in December and January.
The production surge shown in the monthly data is unprecedented. Output rose by almost 850,000 barrels a day between August and November. It makes the first shale boom of 2014-15 look sluggish.
True, that growth rate probably wasn’t kept up through the winter’s cold snaps, but January’s average production rate will almost certainly turn out closer to the 10.25 million barrels a day in the DoE release than to the 9.86 million calculated from the weekly data.
What does this mean?
First, bragging rights. The U.S. is close to becoming the world’s largest producer of crude and condensate — a form of light oil extracted from gas fields — even if it’s not quite there yet. It’s pretty much level with Saudi Arabia’s combined output, itself boosted by condensates not included in headline production numbers, and is closing on Russia’s 10.95 million daily barrels. That could be passed by the end of the summer, according to Citigroup.